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WHAT IS FRANCHISE?

As per Section 2(17)of The Electricity Act, 2003 franchisee means a person authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply, Facilitation of Franchise Model in the Section 14 of the Act: Provided also that in a case where a distribution licensee proposes to undertake distribution of electricity for a specified area within his area of supply through another person, that person shall not be required to obtain any separate licensee from the concerned State Commission and such distribution licensee shall be responsible for the distribution of electricity in his area of supply.

Few names of big Franchises in Electricity distribution business:1) Torrent Power operating in Bhiwandi 2)Tata Power operating in (Jamshedpur) Jharkhand 3)M/S Spanco in Nagpur 4)M/S GTL in Aurangabad 5)M/S Smart wireless Ltd in Gwalior
There are different Franchise Models operating in India. Selection of a model is a critical factor and depends on the socio-economic political and local factors.

Recent Franchise Model In CESU:Our Franchise operation has been started under BOT model covering 15 divisions and name of the Franchise are as under. 1) ENZEN Global Solutions Private Limited. 2)Feedback Energy Distribution Company Pvt Ltd. 3)Riverside Utilities Pvt. Ltd. 4) Seaside Utilities Pvt. Ltd.

Why Franchise Accounting for CESU? 1) Franchise is an agent of the utility. Utility or licensee is the Principal and responsible to the different stake holders with reference to the underlined part of Sec. 14 of the Elect. Act in first slide. 2)As per the disclosure requirement of the Schedule VI of the companies Act 1956 any item under which the expenses are exceeding 1% of the total revenue or Rs.5000/- whichever is higher, should be shown as a separate and distinct item against an appropriate account head in the profit & loss a/c. 3) For clarity in presentation of the financial statement.

Salient features of Franchise agreement attracting Accounting Policy:1) CESU shall raise a monthly invoice to DF on the basis of energy Input for the billing month in respect to the division as per Clause No8.2.6 of the DF agreement. We may recall the same as assured revenue of CESU. 2) It is to mention here that from all the collections deposited in CESU bank account by the DF, deduct the other than EC collection by DF deposited in CESU account. Only EC collection which has been deposited in CESU account will be taken into consideration for calculation of short fall/excess from the assured revenue. 3) Amount in shortfall of assured revenue will be receivable from the DF. Similarly excess collection over the assured revenue shall be shared by DF & CESU in pre-defined stipulation as per the terms and conditions of the DF agreement.

The list of new accounts created are as under. 28.100- Franchisee receivable (ENZEN) 28.101- Franchisee receivable (FEEDCO) 28.102- Franchisee receivable (SEA SIDE) 28.103- Franchisee receivable (RIVER SIDE) 46.131-Franchisee payable (FEEDCO) 46.130-Franchisee payable (ENZEN) 46.132-Franchisee payable (SEA SIDE) 46.133-Franchisee payable (RIVER SIDE) 26.300- Advance to Franchisee (ENZEN) 26.301- Advance to Franchisee (FEEDCO) 26.302- Advance to Franchisee (SEA SIDE) 26.303- Advance to Franchisee (RIVER SIDE) 62.100-Memorandum Franchisee sale 62.990- Other revenue from BOT model 76.201-Distribution Franchisee sharing of BOT Model